HELOC resets not so scary

From the NYT:

Dealing With Home-Equity Resets

New research from TransUnion, a credit information service, suggests that the payment shock expected to hit millions of consumers with home equity lines over the next few years may not pose as much of a risk to lenders as feared.

The home equity lines of credit, known as Helocs, were originated before the housing market collapse when home values were still climbing. According to TransUnion, of the $474 billion in Heloc balances held by nearly 16 million consumers as of the end of 2013, nearly half of the loans were originated from 2005 to 2007, the peak year.

Many of these lines have a 10-year draw period, when borrowers may tap their credit and only make interest payments on the balance. As the draw periods come to an end starting next year, borrowers will have to begin paying both interest and principal on the outstanding balances. The TransUnion study estimates that more than half of the loans have balances of $100,000 or more.

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Times Topic: Mortgages
“The fear has been that this will push a lot of people beyond the limits of their liquidity,” said Ezra Becker, the vice president for research and consulting at TransUnion.

But the agency’s research suggests that fewer than 20 percent of balances are at significant risk of default. The total volume is likely between $50 billion and $79 billion.

“There’s clearly risk in the market,” Mr. Becker said. “But we’re not faced with an unknowable or immeasurable or nebulous fear.”

Concerned about the potential for another wave of defaults, the Office of the Comptroller of the Currency, which regulates banks, has been urging lenders to quantify their level of risk and reach out to borrowers ahead of time. Regulators are encouraging lenders to extend workout or modification programs to borrowers where feasible.

The most recent risk report from the comptroller says that active risk management by the nine largest regulated banks is beginning to reduce their Heloc exposure. For example, at just over $40 billion, the banks’ Heloc end-of-draw volume estimated for 2015 is roughly $10 billion less than estimated back in 2011.

“While improving, substantial challenges remain, and the O.C.C. will continue to monitor exposure levels and lender efforts to mitigate the risks,” the report said.

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30 Responses to HELOC resets not so scary

  1. Subprime is contained.

  2. Mike says:

    Good Morning New Jersey

  3. anon (the good one) says:

    @billmaher: Did something tonight i’ve been wanting to do for 25 years – smoked a joint on stage in Denver http://t.co/ilMx43JlFy

  4. anon (the good one) says:

    But there’s what I would consider an even bigger problem: when it comes to substance, libertarians are living in a fantasy world. Often that’s quite literally true: Paul Ryan thinks that we’re living in an Ayn Rand novel. More to the point, however, the libertarian vision of the society we actually have bears little resemblance to reality.

    In other words, libertarianism is a crusade against problems we don’t have, or at least not to the extent the libertarians want to imagine. Nowhere is this better illustrated than in the case of monetary policy, where many libertarians are determined to stop the Fed from irresponsible money-printing — which is not, in fact, something it’s doing.

    @NYTimeskrugman:
    Libertarian Fantasies http://t.co/ZbcJbu7vd1

  5. why don’t you huff a Hefty bag full of gasoline, anon?

  6. Libturd at home says:

    Krugman is a progressive fool.

    But rather than explain the common libertarian mistake, it is more important for this king of the blue sheep to be divisive. That is his major fault and where he lacks any real credibility with the economic community.

    The fed is buying the extra cash that banks have on hand at a higher cost than banks would typically buy from each other. Of course in an ideal economy, the banks would be loaning their excess cash to individuals and businesses at a much higher rate than the fed is paying. King of the blue sheep Krugman is in support of this. Unfortunately, most economists know that the FED is simply kicking the can down the road. Recessions are a good thing as the economy mends itself. The FED is not allowing this to happen, or at least is severely slowing the healing. Of course, the horrible financial alchemy and the misrepresented products that the banks conjured up that caused the great recession would have bankrupted the banks if the FED didn’t step in. This is why QE is occurring. Of course the side effect is that it is driving people into the equities market which might not be such a good thing if the economy hasn’t really recovered.

  7. Equities are a rigged game of musical chairs in which everyone but the banksters is a pre-determined loser.

    It should be a capital crime to force savers and investors into risk assets.

  8. grim says:

    Krugman smugman, so much for relevance.

  9. anon (the good one) says:

    @pourmecoffee: .@RumsfeldOffice These are the unknown unknowns happening.

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  11. Libturd at home says:

    @Obama: “On this Memorial Day, as our nation honors its unbroken line of fallen heroes – I see many of them in the audience here today – our sense of patriotism is particularly strong.”

  12. Libturd at home says:

    @Obama: “We’re the country that built the Intercontinental Railroad.”

  13. Libturd at home says:

    @Obama: “How’s it going, Sunshine?” –campaigning in Sunrise, Florida

  14. NJCoast says:

    After canceling twice this year what are the odds that Lauryn Hill will show up tonight in Red Bank?

  15. grim says:

    15 – Hopefully the menu is Burgers and Mac n’ Cheese.

  16. Libturd at home says:

    She better perform…Doesn’t she still owe South Orange half a mill?

  17. Byatch should be locked up.

  18. Grease up the sausage machine, Vern.

    “According to the WSJ, in what is a desperate attempt to boost the pool of eligible, credit-worthy mortgage recipients, Fair Isaac, the company behind the crucial FICO score that determines every consumer’s credit rating, ‘will stop including in its FICO credit-score calculations any record of a consumer failing to pay a bill if the bill has been paid or settled with a collection agency. The San Jose, Calif., company also will give less weight to unpaid medical bills that are with a collection agency.’

    In doing so, it will “make it easier for tens of millions of Americans to get loans.”

    http://www.zerohedge.com/news/2014-08-08/housing-recovery-fizzles-new-scheme-emerges-boost-fico-scores-changing-definition

  19. Comrade Nom Deplume, a.k.a. Captain Justice says:

    [3] anon

    “Did something tonight i’ve been wanting to do for 25 years – smoked a joint on stage in Denver”

    So what? I did the same thing in high school.

    Okay, it was OVER the stage, up on the catwalk. And it was a bowl, not a joint. Ah, never mind.

  20. grim says:

    You know you travel way too much when you wake up in a panic that you are going to miss your Monday morning flight, because somehow the alarm had failed to go off … on Sunday.

  21. anon (the good one) says:

    @SportsCenter: UPDATE: Authorities say NASCAR’s Tony Stewart struck and killed driver who was walking on dirt track during race.

    @504_BOYZ: @SportsCenter You can hear Tony engine rev before impact. #Murder

  22. Michael says:

    23- why was this guy walking on the track? I know nothing of the story.

  23. Michael says:

    Lol

    grim says:
    August 10, 2014 at 5:58 am
    You know you travel way too much when you wake up in a panic that you are going to miss your Monday morning flight, because somehow the alarm had failed to go off … on Sunday.

  24. Ben says:

    While libertarian’s understand that allowing the market to set prices results in the most efficient economic outcome for the market as a whole, they completely fail to acknowledge that trading with nations who peg their currencies who’s workers earn 15 cents an hour puts heavy downward pressure on wages domestically and had led to a gigantic trade deficit.

    I’ve always tried to rationalize with them that the US could function as a super efficient economy with tariffs in place and the refuse to acknowledge the fact that America became the richest nation in the world under a boat load of tariffs.

    That being said, Krugman is a complete moron.

  25. anon (the good one) says:

    @BillMoyersHQ: 300,000 Americans threatened to boycott Walgreens if it moved abroad to avoid US taxes. Looks like it worked.

  26. grim says:

    Wish more Americans would boycott Walmart.

  27. Libturd at home says:

    “300,000 Americans threatened to boycott Walgreens if it moved abroad to avoid US taxes. Looks like it worked.”

    This, my blogmates, is the perfect example of progressive science.

    It’s a lot like the argument for climate change. Well since humans are around when the earth is warming, then humans must be the cause.

  28. clotluva says:

    28

    ..because you like overpaying at mom and pop shops? Most small businesses suck. The ones that don’t shouldn’t care about WMT because they aren’t catering to the crowd that values low price at the expense of quality, service, experience, etc.

    WMT is the very essence of creating value through exploiting global supply chains.

    Isn’t that the nature of your own day job?

    Disclaimer: WMT is one of my top 5 holdings.

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